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Places Only Matter Because People Do

Ed asks if there is any way to save upstate New York. But first I have to ask: is it worth saving? Our allegiance should fundamentally be to people, not places. Economic growth includes changes in the distribution of jobs, industries, and regions, and part of the real costs of growth are the costs for people to change jobs, industries, and regions. The market seems to be saying that people are worth more if they move out of upstate New York, and I have no particular reason to question that judgement. (I similarly think that letting poor foreigners move here can work better than figuring out how to improve their local economies.)

My answer is trite but solid: identify and correct for local market failures. That will give the area the best chance to attract activity, though that outcome would still be far from guaranteed. The most obvious uncorrected market failure I can see is inadequate density—we should weaken regulations that discourage higher density, such as minimum lot sizes, excess zoning regulations, and so on.

Richard recommends tolerance training, but I cannot see a substantial market failure there.

Also from This Issue

In this month’s lead essay, Richard Florida, bestselling author of Rise of the Creative Class, argues that the old industrial era has given way to a new creative era. Science and technology, art and design, and culture and entertainment have superceded natural resources and industrial infrastructure as the key to economic success. Talent is now the key factor of production and winners in global economic competition will be those who can best deploy and attract it. However, the creative economy is a source of increasing inequality both within and between nations. Florida argues that the key to bridging the gap between the creative and service sectors is to harness the creativity of service sector workers to make their jobs both higher-paying and more satisfying.

In his reply to Florida’s lead essay, George Mason economist Robin Hanson argues that creativity matters less for economic growth and the future of work than Florida thinks. According to Hanson, Florida’s emphasis on creativity distracts us from the prospect of a truly revolutionary change to work and economy just over the horizon: rapidly exponential growth driven by smart machines. “An economy with intelligent machines could grow very rapidly indeed,” Hanson argues, “and induce rapidly falling human wages.” Will we be prepared if we’re busy making the Creative Class comfortable?

MIT economist Frank Levy agrees that creativity is more important than ever in a world where computers and foreign workers can do routine work less expensively than domestic workers. This shift, Levy says, requires better education in problem-solving. But education can only do so much. The gains from rising labor productivity are going largely to the wealthy, Levy argues. Unless policies and norms are reinstated that spread those gains more widely “all of the nation’s institutions will be at risk.”

While agreeing with much in Florida’s essay, UCLA economist Edward Leamer suggests that the key to understanding the future of work isn’t creativity, but talent. “Is a personal computer like a forklift or a microphone?” Leamer asks. Forklifts are forces for equality, washing out individual differences in ability. Microphones, on the other hand, amplify difference in ability and talent. If training cannot create talent, but can only enhance it, the gains to training will be highest for the talented, and it will not be possible to close the talent and wage gaps by offering more training to the less talented.

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